Three Lessons From Two Months of Tech-Sector Madness

When I came back to Wired.com halfway through the summer, I really did think for a moment that the biggest news for a while would be Marshall McLuhan’s 100th birthday. Instead, we had a flood of corporate catastrophes, near-catastrophes and responses to catastrophe that overtopped the levees until the tormented metaphors themselves cried out for it all to stop.

It would be a shame, though, if we went through all of this for nothing. So let’s try to synthesize a few of the lessons companies can learn from what went right and what went very, very wrong this summer.

Lesson 1: Grow Smart

There’s tremendous pressure on companies, particularly publicly traded companies, to grow and grow. You see, for the most part shareholders don’t profit from steadily profitable business, but unexpected growth. Microsoft grew profit by 30% year over year, and the stock market said meh. For a company as successful as Microsoft’s been, even that kind of growth is priced in.

The best way to grow is to open up new markets or create and deliver popular new products. Here, Apple’s success in the last few years is the model; not only do Americans love iPhones and iPads, but the company’s devices are exploding globally, especially in Asia, in a way that they never have before. The latter is a much bigger deal in sheer numbers than, say, iPhones running on Verizon or Sprint. But even that kind of modest domestic expansion is a route to growth. So Apple sits on its giant cash hoard, refraining from making high-profile acquisitions, because it doesn’t need to grow that way.

In themselves, acquisitions aren’t a bad way to grow — Apple buying NeXT or Google buying Android look like pretty sharp moves right now — but sometimes, in order to meet this felt need to grow, companies get foolish. They buy other companies to create new conglomerates that seem like great ideas on paper. Maybe there’s even a vision in place about how to blend the two organizations in a way that increases the value for everybody.

But then the market moves, or the leadership changes, and the people in charge of these now-giant corporations realize that the culture of their primary business is completely different from that of the business they’ve now acquired. Only because they’ve made such a high-profile bet on this other company, it’s impossible for them to unwind without admitting failure and creating a giant mess.

Lesson 2: Grab That Lifeline

If your company’s having an extended rough patch, and someone is throwing you a lifeline, take it.

If the HP-Palm alliance didn’t quite work, or if the Google-Motorola alliance doesn’t, you can’t fault Palm or Motorola for taking the chance when the acquisition offer came in. Their options weren’t unlimited, and they played it smart: instead of Motorola selling off its patents to Google, or Palm pushing webOS to HP, they were able to secure at least a near-term future for their entire company.

If you want to see what happens when struggling companies don’t take earnest money on the table, look at Yahoo. Microsoft CEO Steve Ballmer offered Yahoo a merger proposal reportedly worth as much as $44 billion back when Yahoo founder Jerry Yang was running the company. Yahoo turned Microsoft down and hired Carol Bartz to turn the company around. Bartz hacked away at Yahoo, following a relatively traditional lean-and-mean, extend-profit-margins prescription, doing the job she’d been hired to do but making few friends along the way.

Would a unified Microhoo have succeeded? We’ll never know. We know Microsoft built up Bing instead, even becoming Yahoo’s search partner along the way; we know Microsoft used Xbox 360 as a media center to build up strengths in classic Yahoo strongholds like sports and games. We know Microsoft had the resources to not just prop Yahoo up, but extend its reach.

Would you be drafting your Yahoo fantasy football league right now in real-time over Xbox Kinect before following multiple games at once over ESPN3? Could unified experiences like that have saved Yahoo from its current fate? That’s just going to have to remain a real fantasy, not a virtual one, forever.

Lesson 3: Plan … Privately

Plan collectively for the future, but keep your plans inside the company until you’re ready to deliver on them.

(Brace yourself, people who hate reading about Apple. Once again, I will point to the most successful tech company in the world as a model of success.)

Apple couldn’t have known exactly when Steve Jobs’ health issues would force him to resign as CEO, but they certainly knew it was likely to happen. They planned for the specifics of founder and architect’s departure in secret, while steadily and publicly building up the responsibilities and profiles of key executives like COO Tim Cook and digital media chief Eddy Cue. They resisted efforts by others to penetrate that plan until it was fully ready and necessary to put into place. Consequently, while there are many question marks still hanging over Apple’s future, the company’s generally perceived to be in good hands.

The PC business was reportedly shopped for months before the announcement. Nevertheless, Apotheker still didn’t have a clear plan for its future, only that with another bad financial quarter, he needed to be seen as having at least a vague one.

One after another, the hardware division’s rumored buyers publicly denied interest. Eventually, having created so much uncertainty that it knew it couldn’t get a fair price for the biggest computer maker in the world, HP had to move resolutely towards spinning the whole division off.

Kind of. Well, at least most of it. Maybe this and this HP might keep.

You could also point to AOL’s Crunchfund disaster or Google’s blow-back over branded accounts and real names as examples of companies that either failed to plan, failed to coordinate their planning company-wide, or failed to communicate those plans clearly. Whatever happened in each case, planning and delivery were sufficiently out of sync that many, many people felt upset, frustrated and betrayed by those at the top.

A lot of these lessons boil down to optics. They focus on the handful of in-company decisions that big technology companies are forced to make or reveal in public, rather than the thousands that go unnoticed in private. It’s also easy to point to successful companies and posit that they’re doing everything right, while the companies that haven’t had as much success are doing everything wrong. All of this is probably unfair.

At the same time, however, running a top company is always about both managing both organization and optics. Companies that can manage these transitions smoothly are almost always better-organized and have less dysfunctional and divided corporate structures than those who can’t.

All of these things speak to whether a company has a clear mission, unified commitment and organizational discipline, or if it’s one or two steps away from a full-blown Mexican standoff.

When this erupts in public, it’s important to remember that the underlying problems were always already there — and events could have unfolded completely differently.